Hong Kong
The Sunday Review

Chinese leader Xi Jinping will be visiting Saudi Arabia this week for the first time in nearly seven years, during which he signed a comprehensive strategic partnership with the world’s largest oil exporter and Leaders from all over the Middle East met them.

A sign that you are being visited is the visit. China and At a time when US-America relations are at an all-time low, the Gulf region is strengthening their economic relationships.Saudi ties have crumbled over OPEC’s decision to slash crude oil supply. As Xi wrote, article Publié in Saudi Media, the trip was meant to strengthen China’s relations with the Arab world.

The two sides signed a partnership agreement that includes several deals and memoranda d’accord, such as those on hydrogen energy and enhancing coordination between the kingdom’s Vision 2030 and China’s Belt and Road Initiative, according the official Saudi Press Agency (SPA). It did not give any details.

China Is Saudi Arabia’s biggest trading partner and This is a source of increasing investment. It’s also the world’s biggest buyer of oil. Saudi Arabia Is China’s largest trading partner in the Middle East and The top global supplier Oil oil.

“Energy cooperation will be at the center of all discussions between the Saudi-Chinese leadership,” said Ayham Kamel, head of Eurasia Group’s Middle East and North Africa research group. “There is great recognition of the need to build a framework to ensure that this interdependence is accommodated politically, especially given the scope of energy transition in the West.”

The world’s governments have taken the pledge to significantly reduce carbon emissions over the next decades. Canada is one of these countries and Germany has doubled their renewable energy investment to speed up their transition to net zero economies.

The United States has seen a marked increase in domestic violence oil and The 2000s saw a significant increase in gas production, which has accelerated the transition to renewable energy.

Russian invasion in Ukraine Februar All countries are racing to find ways to address the global energy crisis. Further, the West has scrambled to contain the crisis. oil Markets by lifting an embargo and price cap on the world’s second biggest exporter of crude.

Security of energy has become a priority. China, which is now facing serious challenges of its own.

Last year, bilateral trade between Saudi Arabia and China Chinese customs figures show that the Chinese economy reached $87.3 billion in 2018, a 30% increase over 2020.

The trade was largely focused on oil. China’s crude imports from Saudi Arabia It accounted for 77% of the total goods imports from Saudi Arabia, which stood at $43.9 billion by 2021. It also represents 77% of its total goods imports from the kingdom. more than a quarter of Saudi Arabia’s total crude exports.

“Stability of energy supplies, in terms of both prices and quantities, is a key priority for Xi Jinping as the Chinese economy remains heavily reliant on oil and natural gas imports,” Eswar Prasad is a Cornell University professor of trade policy.

The world’s second largest economy is heavily reliant on foreign oil and gas. 72% of its oil Official figures show that consumption was almost entirely imported in 2013. 44% of natural-gas demand came from abroad.

At Xi stressed energy security as a top priority at the 20th Party Congress held in October. After a string of severe power cuts, these comments were made. and soaring global energy prices following Russia’s invasion of Ukraine.

In the months following the invasion, the West avoided Russian crude oil. China took advantage of Moscow’s desperate search for new buyers. Between May and June and Russia July China’s No. 1 oil supplier, until Saudi Arabia In August, it retook the top spot.

“Diversity is a key ingredient for China’s long-term energy security because it cannot afford to put all of its eggs in one basket and turn itself into a captive of another power’s energy and geostrategic interests,” Ahmed Aboudouh (nonresident fellow) is with the Middle East Programs, Atlantic Council, a research institution based in DC.

“Although Russia is a source of cheaper supply chains, nobody can guarantee, with utmost certainty, that the China and Russia relationship will continue to shore up 50 years from now,” Aboudouh stated.

The Saudi Press Agency cited Saudi Prince Abdulaziz bin Salman, energy minister, said Wednesday that the kingdom would continue to be China’s “credible and reliable partner in this field.”

Saudi Arabia Strong motivations exist to strengthen energy ties with others. ChinaGal Luft, codirector of the Institute for the Analysis of Global Security said so.

“The Saudis are concerned about losing market share in China in the face of a tsunami of heavily discounted Russian and Iranian crude,” He stated. “Their goal is to ensure China remains a loyal customer even when the competitors offer [a] cheaper product.”

On fears of a global economic slowdown, oil prices have fallen back where they were prior to the Ukraine war. How severe that slump will be will depend on how fast the Chinese economy recovers next year.

Security of supply does not include Saudi Arabia Beijing could be offered another prize, with greater geopolitical implications.

Riyadh was in talks with Beijing price some of its oil sales To China In the Chinese currency, the Yuan, it is rather than According to a Wall Street Journal report, the US Dollar. Such a deal could be a boost to Beijing’s ambitions to expand the Chinese currency’s global influence.

It would also be a violation of the long-standing agreement between Saudi Arabia and The United States has a requirement Saudi Arabia Sell your product oil Only for US Dollars and To hold its reserves partially in US Treasuries in return for US security guarantee. The “petrodollar system” has helped preserve the dollar’s status as the top global reserve currency and payment medium for oil and Other commodities

Although Beijing and While Riyadh did not confirm the reports of talks between the sides, analysts stated that it was natural for them to explore the possibility.

“In the near future, Saudi Arabia could sell some of its oil and receive revenues in Chinese yuan, which makes economic sense as China is the kingdom’s top trading partner,” Naser Al Tamimi is a senior associate researcher at ISPI, an Italian think-tank on international affairs.

Some believe it’s already happening, but that neither China The Saudis will not highlight this publicly.

“They know too well how sensitive this issue [is] for the United States,” Luft. “Both parties are overexposed to the US currency and there is no reason for them to continue to conduct their bilateral trade in a third party’s currency, especially when this third party is no longer a friend of either.”

Xi’s visit could mark another step “in the erosion of the dollar’s status” He added, “as reserve currency.”

However, there are limitations to growing. Riyadh has ties and Beijing.

“The Biden administration’s approach to the Middle East has concerned the Saudis, and they see a growing relationship with China as a hedge against potential US abandonment and a tool for leverage in negotiations with the United States,” Jon B. Alterman is the director of the Middle East Program, Center for Strategic Studies. and International Studies is a Washington DC-based thinktank.

The Biden administration has refocused its policy priorities to counter terrorism. China. It also announced its intention to reduce its presence there, causing concern among its allies that the United States may no longer be as committed to the Middle East as it was in the past.

“All that being said, Chinese-Saudi ties pale in both depth and complexity to Saudi-US ties,” Alterman said. “The Chinese remain a novelty to most Saudis, and they are additive. The United States is foundational to how Saudis see the world, and how they have seen it for 75 years.”

Despite the possibility of shifting to yuan transactions, it’s too early to say Saudi Arabia In pricing it, we would drop the dollar oil Sales, analysts said.

Eurasia Group’s Kamal believes it’s “highly unlikely” That Saudi Arabia This would be a reasonable step, except if there is an implosion of the US-Saudi relationship.

“In essence there could be discussion on pricing of barrels to China in yuan, but this would be limited in size and probably only correspond to bilateral trade volumes,” He stated.

Prasad of Cornell University stated that countries like China, Russia, and Saudi Arabia All are eager to lessen their dependency on the dollar oil Contracts and Other cross-border transactions

“However, in the absence of serious alternatives and with few international investors willing to place their trust in these countries’ financial markets and their governments, the dollar’s dominant role in global finance is hardly under serious threat,” He stated.